Japanese yen slides after lackluster GDP numbers

known for its large debt, which
stands at more than $10 trillion. Today, the country released the second
reading of the economic growth. The number showed that the economy expanded by
an annualized rate of 1.4%. This was in line with expectations and higher than
the previous reading of -2.6%. On a QoQ basis, the economy expanded by 0.3%,
which was lower than the expected 0.4%. On a positive note, the country’s GDP
price index contracted by 0.3%, which is lower than the expected -0.4%. This
number measures the change in price of goods and services included in the GDP.
The capital expenditure rose by 2.4%, which was higher than the expected 1.8%
while the external demand declined by a smaller margin.

The Japanese economy growth is
lower than that of the United States and China, which have an economic growth
of 2.6% and 6.5% respectively. The country is also facing a major challenge
with the sluggish inflation despite being in full employment. The reason for
this is that the country’s workforce is different from that of the other
countries. This is because in other countries, when the labor market tightens,
the people tends to move to other companies in search for better wages. In
Japan, they tend to stay in companies because of the national pride. They also
work for more hours, even without the overtime pay.

Another challenge for Japan is
its shrinking population. The population, which is currently at 126 million
people is expected to fall to 87 million in 2060. There are a number of reasons
why the population is falling. First, young people are becoming increasingly
isolated. Second, most Japanese live in cities where life is expensive. As
such, couples tend to prefer having fewer babies they can support. Third, there
has been an increasing entry of women to the labor force. Fourth, there has
been a challenge for Japanese people to find high-paying jobs to support the
families.

This year, the Japanese yen has
been falling against the USD. The USD/JPY has risen from a low of 105 to above
111 as shown in the annual chart below. The pair is still below the yearly high
of 114. Therefore, the pair could continue moving up, as the Japanese economy
continue being sluggish at a time when the Fed is likely to have another hike.
From a technical perspective, the 21-day and 42-day EMAs are crossing one
another which is a sign that it will continue moving up.

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